Business / Economy

China not to blame for current economic reversals: Argentine analyst

(Xinhua) Updated: 2015-08-27 11:06

BUENOS AIRES - The global economy, though with shrinking stock and commodity markets, can avoid a major crisis if governments put the right policies in place, an Argentinean analyst said in a recent interview with Xinhua.

Although China wields a strong economic impact on the world, it was not to blame for current reversals, said Gustavo Girado, director of the Asia and Argentina consultancy.

"I do not believe that all of these problems are due to China's economic reality. The global economy is undergoing a time of important adjustments, particularly in the European Union (EU) as it grapples with Greece's debt," he said.

Furthermore, "the highly anticipated interest rate hike in the US set to happen around the end of the year will see capital flow to the US from emerging economies, which will only quicken a lack of confidence in weaker markets," added Girado.

According to the analyst, China was highly important in this context, although its recent macroeconomic results and industrial activity were no longer ideal to prop up global economic activity.

"Low growth in China will result in low demand for commodities and will lead international prices to trend downward. As China is focusing on stimulating internal growth and less on fostering investment, its demand for raw materials, such as iron ore and copper, will drop, thereby impacting major emerging markets, like Brazil," said Girado.

He urged for clear political measures to be taken to avoid a risk of this kind of crisis.

He said Beijing was undergoing a special moment as it has decided the country needs to grow more slowly, dubbed "the new normal", and stimulate internal consumption, which has led Chinese exports to grow far more slowly.

"The 8 percent drop in Chinese exports in July shows that this problem is not about economic measures but about time-frames," he said.

"Decisions such as lowering exports have a rapid impact on the world, which has been manifested in the sharp drop in Chinese stock exchanges, as investors realize they must lower their expectations of future profits," he said.

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